At last… certainty on electronic signatures and virtual meetings
On 10 February 2022, the Federal Government passed new legislation (per the Corporations Amendment (Meetings and Documents) Bill 2021 (Cth)) (2022 amendments) that amends the Corporations Act 2001 (Corporations Act) to expand and make permanent previous temporary measures introduced during the Covid-19 pandemic to allow electronic execution of documents and virtual company meetings.
The 2022 amendments will replace the temporary amendments made by the Treasury Laws Amendment (2021 Measures No 1) Act 2021 (2021 amendments) that had been introduced to replace earlier relief measures that had expired on 21 March 2021. The 2021 amendments are due to expire on 31 March 2022.
The 2022 amendments relating to execution of documents (including execution of deeds and execution by sole directors) will take effect the day after the Act receives Royal Assent. The amendments relating to meetings and sending documents (and the additional polling changes for listed companies) are due to commence on 1 April 2022, after the temporary relief expires.
What you need to know
Technology neutral signing
The 2022 amendments introduce new Part 1.2AA (Signing Documents) to the Corporations Act.
The new provisions permit electronic signing of documents by or on behalf of a company. This includes documents such as:
- contracts or deeds;
- documents relating to a meeting of members;
- documents relating to a meeting of directors (or committee of directors); and
- written resolutions of directors or members.
Under the reforms, a person may sign a document by signing a physical form of the document by hand or by signing an electronic form of the document using electronic means. In both cases, the signing method must:
- identify the person and indicate the person’s intention in respect of the information recorded in the document; and
- be either:
- as reliable as appropriate for the purpose for which the information was recorded, in light of all the circumstances; or
- proven in fact to have fulfilled the identity and indication of intent requirements by itself or together with further evidence.
For the avoidance of doubt, the new provisions make clear that:
- a person need not sign the same form of document as another signatory;
- a person need not sign the same page of the document as another signatory;
- a person need not use the same signing method as another signatory; and
- it is not necessary for the whole document to be included in the form of the document signed by a person.
If a person signs in different capacities:
- the person is treated as a different person in each capacity they sign the document; and
- may sign the document in some or all of those capacities by signing the document once if the document requires or permits the person to do so and states the capacities in which the person is signing the document.
Execution of deeds
The technology neutral signing provisions apply to the execution of deeds under the Corporations Act.
The 2022 amendments clarify that:
- a company may validly execute a deed under section 127 of the Corporations Act; and
- an agent acting with the company’s express or implied authority may execute a deed on behalf of the company under section 126 of the Corporations Act (and such individual need not be appointed by deed).
If a deed is executed under section 127 or 126 of the Corporations Act, the deed:
- should state it is executed as a deed;
- need not be witnessed;
- may be executed in physical or electronic form; and
- need not be, and need not state it is, ‘delivered’ in order to take effect.
In addition, the 2022 amendments make permanent earlier amendments that allow the fixing of a common seal to be observed by electronic means.
Previously, section 127 of the Corporations Act did not expressly provide for execution of documents by a sole director who was not also the sole company secretary of the company.
The 2022 amendments now expressly permit a sole director to validly execute documents under section 127 if the person is also the sole company secretary or if the company does not have a company secretary.
The 2022 amendments make permanent the temporary relief permitting use of virtual meeting technology for members’ meetings, directors’ meetings and meetings of a registered scheme’s members. (The amendments clarify that these provisions also apply to ACNC-regulated companies.)
A directors’ meeting may be held using any technology consented to by all directors. The consent may be a standing one. A director may only withdraw consent within a reasonable period before the meeting.
A meeting of members of a company or registered scheme can be held:
- at one or more physical venues (i.e. a physical meeting);
- at one or more physical venues and using virtual meeting technology (i.e. a hybrid meeting); or
- using virtual meeting technology only (i.e. a wholly virtual meeting).
If a meeting is held at more than one physical venue, the notice of meeting must specify the main physical venue for the meeting.
A wholly virtual meeting of members of a company or registered scheme is only permitted if the company’s constitution expressly requires or permits this. In the case of a registered scheme, the provisions permitting wholly virtual meetings must have been included in the scheme’s constitution at the time the scheme was established or by special resolution of the members.
A quorum is determined by counting all eligible participants attending either physically or virtually.
A meeting of members must allow the members, as a whole, a reasonable opportunity to participate in the meeting. The effect of this requirement includes:
- the meeting must be held at a time that is reasonable;
- if the meeting is held at only one physical venue, it must be reasonable to hold the meeting at that venue;
- if the meeting is held at more than one physical venue, it must be reasonable to hold the meeting at the chosen main physical venue and the technology used to hold the meeting at more than one physical venue must be reasonable; and
- if virtual meeting technology is used, the technology must be reasonable and allow members who attend the meeting using the technology, as a whole, to exercise orally and in writing their rights to ask questions and make comments.
If members, as a whole, are not provided a reasonable opportunity to participate in a meeting or proceeding at a meeting, the meeting or proceeding will only be invalid if a Court is of the opinion that a substantial injustice has been caused or may be caused (which cannot be remedied by an order of the Court) and the Court declares the meeting or proceeding invalid.
Sending documents by electronic means
The 2022 amendments will permit certain meetings-related documents to be sent to a person electronically or in physical form. The relief extends to any document that a company, responsible entity or disclosing entity is required or permitted to give, send or otherwise provide a person under the Corporations Act, including:
- notices of a meeting of members;
- notices of a resolution to be considered by members without a meeting; and
- minute books.
The amendments expressly permit these documents to be sent in physical or electronic form, or by providing the person (in physical or electronic form) with details sufficient to allow the person to access the document electronically. However, a document may only be provided electronically if, at the time the document is provided, it is reasonable to expect the document would be readily accessible so as to be useable for subsequent reference.
Annual reports may be taken to be sent if made available in electronic form on a website.
A member may elect to receive documents in physical form or electronic form, and a company must comply with the member’s election. Failure to take reasonable steps to comply with a member’s election will be a strict liability offence. However, failure to provide a document in the required form will not invalidate the giving of the document by the sender.
In addition, a member may make ad hoc requests to receive a particular document in physical or electronic form, and a company must take reasonable steps to comply with such requests. Failure to take reasonable steps to comply will be a strict liability offence.
Public companies, disclosing entities and registered schemes must notify members of the member’s right to elect to be sent documents in physical or electronic form, and to not be sent annual financial reporting documents. Failure to do so will be a strict liability offence. The notice must be sent to members at least annually, or be made readily available on a website.
Additional changes for listed companies
Voting on resolutions
The 2022 amendments clarify that a resolution put to vote at a meeting of members, other than a poll demanded on the election of a chair or the question of an adjournment, may be decided on a show of hands (even if the meeting is held using virtual meeting technology) unless a poll is demanded.
However, for listed companies, a resolution put to vote at a meeting of members must be decided on a poll if:
- the notice of meeting set out an intention to propose the resolution and stated the resolution;
- the resolution is a members’ resolution that the company has given notice of in accordance with the Corporations Act; or
- a poll is demanded.
The policy rationale for this new requirement is that these resolutions are usually substantive in nature and polls are considered more accurate, reliable and a better reflection of the voting power of the members than votes conducted by a show of hands.
Request for independent reports on polls
The 2022 amendments also allow certain members of listed companies and registered schemes (with at least 5% of votes) to request the company or responsible entity appoint an independent person (e.g. an auditor or registry service provider) to observe and report on the conduct, or scrutinise and report on the outcome, of a poll at a meeting of members.
A request for a report on the conduct of a poll must be made at least 5 business days before the day the meeting is held.
A request for a report on the outcome of a poll must be made within 5 business days after the day the meeting is held (and may be made before the meeting is held).
A company or responsible entity will commit a strict liability offence if it fails to take reasonable steps to give effect to a valid request for an independent report on a poll and make available a copy of the report to members within a reasonable time.
The company or responsible entity must keep a copy of the report. Failure to do so is a strict liability offence.
Further review of 2022 amendments
The 2022 amendments require the relevant Minister undertake further review of the operation of the amendments at a later date. The review must be conducted by the earliest practicable day after the end of 2 years after commencement of the 2022 amendments.
To the extent the review concerns the holding of wholly virtual meetings, it is to be conducted by an independent panel.
The Minister must table a copy of the report(s) on the review in each House of Parliament within 15 sitting days after the Minister receives the report(s).
With respect to the provisions permitting wholly virtual meetings, if the Minister does not cause a report in respect of those provisions to be tabled in Parliament on or before the first sitting day after the end of 30 months from the commencement of the 2022 amendments, those provisions will cease to apply.
This article provides general commentary only. It is not legal advice. Before acting on the basis of any material contained in this article, seek professional advice.
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